SWITZERLAND – Swiss bank UBS saw expenses for its pension plans increase significantly after it was forced to change actuarial assumptions last year and adopt new accounting standards.
The bank has several pension plans in various countries, with the Swiss plan being the largest at CHF21.8bn (€17.7bn) and the others amounting to CHF3.8bn.
In October last year, the company decided to apply the Swiss accounting standard FER 16 for its Swiss pension plan.
In its annual report, it said: "The requirements of FER 16 are better aligned with the specific nature of Swiss pension plans, which are hybrid, in that they combine elements of defined contribution and defined benefit plans but are treated as defined benefit plans under IFRS."
For the international plans, UBS last year had to adopt the revised IAS19 standard, IAS 19R, which eliminated the 'corridor method' allowing companies to defer actuarial gains and losses.
In total, these changes in pension accounting resulted in "extraordinary expenses" of CHF3bn for the Swiss pension plan and CHF890m in the international DB plans.
In addition, UBS adjusted the discount rate in its Swiss plan from 2.3% in 2011 to 1.9% in 2012, resulting in expenses of CHF730m.
UBS changed asset allocation in the Swiss plan only slightly over the last year to include for the first time foreign non-investment-grade bonds, which now make up 3% of the portfolio.
In turn, it cut the share of foreign investment-grade bonds from 41% to 32% while increasing the share of domestic investment-grade bonds from 12% to 16%.
The rest of the portfolio is invested in equities (31%), real estate (16%) and 'other' investments (4%).
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